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    Russian Press - Behind the Headlines, October 16

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    Investigation Launched against Member of Parliament/ Investment Quorum: No Complaints about Business Climate in Russia/ Regional Development Minister Resigns

    Investigation Launched against Duma Deputy

    Alexander Knyshov’s days as a State Duma deputy may be numbered. The Investigative Committee  is about to submit evidence to the State Duma showing that the United Russia deputy has broken the law prohibiting members of

    Parliament from earning an income from any activities other than teaching or research. From September 2010 to

    August 2012 Knyshov allegedly sat on the board of directors of Inbisters.r.o, a limited liability company established by him and registered in Slovakia. After the committee completes the investigation, Knyshov is likely to become the second State Duma deputy after Gennady Gudkov to be unseated for engagement in business activity.

    The investigation has determined that Knyshov is also registered as a founder of 16 businesses in Russia. In addition, according to the Federal Taxation Service, Knyshov is the CEO of two companies he personally founded: the South-Russian Center of Information Technologies Region 2000 and Rostovstroimaterialy Production Association.

    United Russia faction leader Andrei Vorobyov said that there is no evidence of Alexander Knyshov’s violations.
    Vorobyev has staunchly defended Knyshov since the first reports of Knyshov’s possible breaking of the law.

    “It is clear that the opposition will try to benefit from this situation and cite various precedents,” Vorobyov said. “But as far as I know, Knyshov cannot be unseated because there is no hard evidence against him. So far, these are just empty accusations, and I trust my fellow party members.”

    Sergei Neverov, the head of United Russia’s General Council, was more categorical in his statements. He asserted that anyone found to have violated the law would be punished, regardless of party affiliation.

    “Everyone is equal before the law, and there is going to be no protection racket,” he said.

    The discrepancies in Vorobyov’s and Neverov’s statements have fuelled rumors of infighting within United Russia. It is not as if Vorobyov was not aware that there is a commitment to carry out a thorough investigation, and do some serious house cleaning in case of violations, a senior Kremlin source said.

    A source in the presidential administration confirmed there would be no preferential treatment for Duma deputies regardless of their membership of a particular political party, including United Russia.

    “Opinion polls show that there is very strong public demand to purge all state bodies of offenders,” the source said. “More than 76 percent of Russians want this and expect it to be a systematic process that will progress regardless of party affiliation.” Law enforcement agencies launch investigations against members of parliament as soon as they obtain evidence against them. “We proceed from the fact that, if violations are confirmed, the deputy in question will be unseated,” he said. “This is a systematic effort.”

    Investment Quorum: No Complaints about Business Climate in Russia

    Business executives taking part in a meeting of the Foreign Investment Advisory Council had no complaints about the business climate in Russia. They do not seem to want competition from other foreign investors who still think the risks are too high.

    Prime Minister Dmitry Medvedev seemed  more comfortable chairing the FIAC meeting on October 15 than he was during the “Russia in a Global Context” session of the World Economic Forum in Moscow the day before, where international experts targeted mild criticism at Russia’s economic policy.

    Foreign investors praised the Russian government’s efforts to improve the investment climate, even though Medvedev himself had to admit in his opening remarks that “we must work harder still to improve the investment climate.”

    He cited figures from a report by Alcoa CEO Klaus Kleinfeld: “In 2007, only 8 percent of foreign companies believed that Russia was making progress in terms of attracting foreign investment; now more than one third do,” adding that “even one third is still a minority.”

    It was in fact that minority who attended the meeting – large foreign companies already involved in major investment projects in Russia.

    If anyone was expecting the leaders of Siemens, Alcoa, Procter & Gamble, Ernst & Young, Nestle, or EBRD to criticize the Russian government, they were in for disappointment. Even Richard Burrows, head of the BAT cigarette maker, who is facing a rise in tobacco excise tax in Russia in 2013, did not voice a single word of complaint. The only “problems” the top foreign executives did mention were minor technicalities which can be easily overcome.

    Mr. Burrows mentioned the fact that Russian laws allow a very broad interpretation of the term “initial permits” required to start an industrial construction project in Russia.

    But more than anything else, the participants made it very clear that what they really wanted was to expand their businesses in Russia and boost sales rather than a friendlier environment to start up a business.

    The only harsh statement – in essence but not in form – was made by EBRD President Sir Suma Chakrabarti, who mentioned problems with the U.S. Foreign Account Tax Compliance Act, which requires Russian banks to sign agreements with the tax authorities, something which conflicts with Russian legislation. He also reminded the audience that foreign banks have long been asking Russia to make some amendments to the Russian Civil Code.

    The overly compliant sentiment prevailing among foreign investors can be partly explained by their companies’ strong presence in Russia. To them, a potential dramatic improvement of the investment climate would bring more than expanded business opportunities. It would also mean the arrival of major foreign rivals who previously believed that the risks were too high. The discussion of Russia’s investment climate with two thirds of potential investors – those who could have given first-hand reasons why they are not investing in Russia – absent, cannot give Medvedev an unbiased picture.

    Regional Development Minister Resigns

    Vladimir Putin has accepted the resignation of Regional Development Minister Oleg Govorun. Sources say the minister
    was offended by public criticism of his performance.

    Presidential press secretary Dmitry Peskov has denied the rumor about Govorun’s resignation. Medvedev’s press secretary Natalya Timakova declined to answer and the Regional Development Ministry refused to comment.

    In late September, Putin criticized Govorun for failing to fulfill executive orders. Putin said during a meeting on the draft budget for 2013-2015 that some ministers were not working hard enough to fulfill the tasks formulated in
    May, that they had “made an initial attempt to tackle them, though I believe a purely formal one, without really trying to master these tasks.” Govorun was criticized for failing to provide housing for families with three or more children.

    A source close to the Kremlin said that what Putin was really dissatisfied with was Govorun’s performance during the relief operation following the flooding in Krymsk in July. Although Govorun chaired the government’s relief commission, it was the president who actually dealt with the issue.

    Govorun submitted his resignation a week after this meeting, according to Forbes Magazine. Timakova and Peskov denied this and Govorun’s deputy said his absence from work was due to illness.

    The Kremlin did not want to dismiss Govorun, a source on his team said. When Govorun refused to budge, they convinced him to go on sick leave to give them time to find a replacement. None of the sources could say who that would be. Criticizing officials who have only been in their posts for a few months is unfair, said a government source. He added that people in the previous government had been failing on a far wider scale and for years,
    without a single responsible official being punished.

    Govorun and the Regional Development Ministry were expected to change their tactic, strategy, functions and staff, a source in the ministry said. The minister was expected to have eight deputies responsible for the eight federal districts. Only two have been appointed so far: Sergei Vereshchagin for the North Caucasus and Sergei Darkin for the Volga Federal District.

    The ministry staff expected it to be split into a Construction Ministry and a Nationalities Policy Ministry. When presidential representative in the Central Federal District Govorun accepted the post of minister, officials and experts thought that the ministry would be given political functions. Under Govorun, the ministry would be unlikely to engage in politics but would deal efficiently with economic matters, Oleg Matveychev, the Kremlin’s spin doctor and former member of the presidential Executive Office, said following Govorun’s appointment.

    The Regional Development Ministry is an artificial body whose tasks can be distributed among the Economic
    Development Ministry, the Transport Ministry and the Industry and Trade Ministry, said FBK partner Igor Nikolayev.

    Considering the major differences between Russian regions, the ministry should be a highly influential body coordinating the operation of industry-specific agencies, argues Director General of IRP Group Bulat Stolyarov.

    RIA Novosti is not responsible for the content of outside sources.